making your business less taxing

If you employ staff and run a pension scheme the minimum contributions rates are increasing from April 2018 as set-out in the table below. This has long been the intention of The Pension Regulator (TPR) and is known as phasing.

Date

Employer minimum contribution

Staff contribution

Total minimum contribution

Until 5 April 2018

1%

1%

2%

6 April 2018 to 5 April 2019

2%

3%

5%

6 April 2019 onwards

3%

5%

8%

If we provide your payroll services then we will of course implement the increased rates on your behalf but because this represents an increased cost for both employer and employee we highly recommend that you let your staff know in advance of this change. To do so you may like to use this TPR letter template.

Small business owners will probably find that yesterday’s budget was not as bad as some of the headlines are making out. Yes national insurance will increase for the self-employed and company shareholders will again see an increase in their personal tax bills but a quick look at the numbers shows that, for now, these increases are likely to be modest.

Mr Hammond suggested that the self-employed earning below £16,250 will actually end up paying less National Insurance – and this seems about right. In fact even if profits were around the £25,000 mark then the increase (which will start from April 2018) will be only around £140.

As for small company owners that pay themselves using a mix of salary and dividends (for the best 2017/18 salary and dividend mix see here) the announcement means a basic rate taxpayer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.

On The Bright Side

Very welcome was the postponement to Making Tax Digital for the self-employed which for those under the VAT threshold means that quarterly reporting will not now become mandatory until April 2018 (starting April 2020 for limited companies).

And any firm coming out of Small Business Rate Relief will receive an additional cap next year on increases of no more than £50 a month.

Download our more detailed guide to the budget (including current and newly announced tax rates and thresholds) here.

Enjoy saving tax?

We have two videos to help on ourchannel; and for regular tax-tips follow our blog on or click +Follow at the bottom of this page.

It should be noted that since the introduction of the dividend ordinary tax rate of 7.5% on dividends over £5,000 there will be a personal tax bill of £2,138 (last year £2,025) if dividends are paid all the way up to the basic rate limit of £45,000 (last year £43,000).

For those companies that also have non-director employees on the payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,500 and dividends up to a maximum of £33,500 (the overall tax saving between the director and the company being around £234).

This second option will not be the best fit for everyone. More that ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.

Enjoy saving tax?

We have two videos to help on ourchannel; and for regular tax-tips follow our blog on or click +Follow at the bottom of this page.

Just a reminder that there are many businesses out there purporting to be or work with UK government agencies such as Companies House and HMRC. Before acting on any such correspondence arriving by email or letter please take care to verify its legitimacy.

Carefully watch out for the imitation letters – those which copy very closely the style and logos used by Companies House and HMRC.

As an example, this week I received a letter from Commercial Register demanding that I update and return my company’s details by a given deadline. There was no request for payment. Pictured below (overlapping the enclosed form (at the top) and the return envelope)

On closer inspection the letter comes from Direct Publisher S.L.U. Madrid. Whilst many scams involve requesting a small payment by return (say £15-£30 typically) it seems that Commercial Register await your return of details then invoice your company €993 euros for an advertising directory entry! Apparently this is for the order you place when completing your details – which is certainly not made clear.

Please be careful with your personal and company details.

Feel free to share this info with fellow business owners and your own admin staff. And, as a Massey Accounting Company client please always feel free to ask if in doubt.

As a reminder the legitimate Companies House logo is shown below

Of course Companies House and HMRC are aware of such frauds and their guidance can be found here:

As a general rule gifts to customers are not allowable against your taxable profits.

However, follow this guidance and you can afford to be a little more generous with your customers this year:

Small gifts which carry a conspicuous advertisement for the trader are an allowable expense. Common examples include: branded diaries, pens and mouse mats. The advertisement must be on the gift, not just the wrapping.

Unfortunately the expenditure of the following kind is specifically excluded (even if it incorporates your advertisement): Food, drink, tobacco, gift vouchers and gifts exceeding £50 per recipient (even if it carries your business logo).